Record Bank Borrowing from ECB’s Second Round LTRO

Here is what I wrote last Sunday,

Despite talks of ‘stigmatization’ or the reluctance to avail of European Central Bank facilities by several banks, I expect the reopening of the second three year Long-term Refinancing Operations (LTRO) facility will be utilized to the hilt.

Apparently there had been no signs of stigmatization as European banks flocked to the ECB to borrow in record numbers.

From the Bloomberg,

The number of financial institutions flocking to the European Central Bank’s three-year loans soared to 800 and borrowing rose to a record in an operation that may boost the euro-area economy.

The Frankfurt-based ECB said it will lend banks 529.5 billion euros ($712.2 billion) for 1,092 days, topping the 489 billion euros handed out to 523 institutions in the first three- year operation in December. Economists predicted an allotment of 470 billion euros in today’s tender, according to the median of 28 estimates in a Bloomberg News survey.

“The astonishing number this time is the number of banks participating, which signals that a lot more small banks looked for the money and it is likely they will pass it on to the economy,” said Laurent Fransolet, head of fixed income strategy at Barclays Capital in London. “So the impact may be bigger than with the first one.”

Two factors here:

This is about the preservation of the debt based welfare political system and thus the gargantuan subsidies to the banking system, the chief financiers of the welfare state.

Second, “who the heck would refuse free money???!!!” Certainly bankers will take them and did so.

As for yesterday’s 5% crash in gold prices, rumors have it that cartel operations could have been responsible for the bear raid for unspecified reasons. If true, my guess is that the manipulation gold-silver market must have probably been aimed at dampening the effect of the record ECB borrowings by Euro banks. Nothing to see here, move along.

Yet the inflationism (currency debasement policies) seen above represents a fundamental reason to remain bullish on gold.